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How the PlayStation 4 Will Compete

A stream of smaller consoles is coming on to the market this year, but the PlayStation should be fine.

Signaling the pent-up demand for next-generation gaming consoles that's simmering in the market, GameStop(NYSE:GME) indicated that it expected demand for the new Sony(NYSE:SNE) PlayStation 4 to drain the supply. That's great news for the retailer, which has been struggling to keep up with changes in customer buying habits. But it's also good news for Sony, which is launching a new console into a market that's soon to be thick with second-tier gaming systems.

The competitionUntil now, the gaming market has been dominated by three big players -- Sony, Microsoft (NASDAQ:MSFT), and Nintendo. This year promises to be a game changer, though, as new systems like the OUYA come onto the market. The OUYA is a small console that is designed to run Android games on the big screen, and it's been generating huge amounts of buzz in the gaming world. The system is priced at around $100, including one controller, and will be available in early June.

The PlayStation 4 controller actually looks very similar to the OUYA controller, and both will support touch interaction through a small pad in the middle of the device. But apparently customers are still yearning for the benefits of the more traditional system, including the PlayStation network and huge titles like God of War and Final Fantasy, which appear only on the PlayStation.

In addition to the new small consoles, Sony will be contending with its archrival, the Microsoft Xbox. The announcement for the new Xbox is rumored to be coming in early June, at this year's E3 convention. Analysts are predicting that the new machine will also have a late 2013 launch date, putting it in direct competition with the PlayStation 4. Since there are almost no details about the system, GameStop has not made any official announcements, but Xbox 360 consoles were sold out or on backorder for months after the launch in 2005.

PlayStation 4 specsDetails of the PlayStation 4 continue to emerge, but we know that it's going to have some impressive new rendering capabilities and touch interaction. That's not a huge leap forward, but Sony is banking on the demand for its exclusive titles to make up for the small upgrades in hardware. One of the biggest advantages that the new PlayStation will have comes from Sony's active courting of independent developers.

That's taken action away from Microsoft, who initially had formed strong bonds with those same developers. As video game analyst Ben Kuchera pointed out, developers working with Microsoft has suffered recently "due to patch fees and the requirement to work with large publishers, and the abundance of ads on the Xbox dashboard is hurting the discoverability of smaller games." That has given Sony an easy win, and should help the PlayStation compete with the indie-focused OUYA.

In short, the new PlayStation 4 looks like it's going to make a splash with gamers and retailers. GameStop has said that the first half of the year is going to be soft, but expect good things to follow from its work with the PlayStation at the end of 2013.